Opinion
7:20-cv-01305-TMC
01-31-2022
John F. Floyd, Gordon Farms Inc., Plaintiffs/Counter-Defendants, v. City of Spartanburg South Carolina, Defendant/Counter-Claimant.
REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE
Jacquelyn D. Austin, United States Magistrate Judge.
This matter is before the Court on the parties' cross-motions for summary judgment. [Docs. 36; 37.] Pursuant to the provisions of 28 U.S.C. § 636(b) and the Text Order from the Honorable Timothy M. Cain referring these motions to the undersigned on September 30, 2021 [Doc. 49], this magistrate judge is authorized to submit findings and recommendations to the District Court regarding these motions.
Plaintiffs/Counter-Defendants (“Plaintiffs”) filed this action on April 6, 2020, asserting various claims arising out of agreements the parties made relating to the costs of redeveloping a shopping center. [Doc. 1.] On June 5, 2020, Defendant/Counter-Claimant (“the City”) filed an Answer and Counterclaim and subsequently filed an Amended Answer and Counterclaim. [Docs. 6; 22.] Plaintiffs filed an Answer to the Amended Counterclaims on August 25, 2020. [Doc. 23.]
On May 14, 2021, the parties filed cross-motions for summary judgment. [Docs. 36; 37.] They subsequently filed responses to the motions, replies, and supplemental memoranda in response to the Court's request for additional briefing on particular issues. [Docs. 41; 42; 45; 47; 54; 55; 56; 57; see Docs. 51; 53.] Both motions are now both ripe for review.
BACKGROUND
The Intergovernmental Agreement
On December 14, 1998, the City and Spartanburg County (“the County”) entered into the Intergovernmental Agreement (“IGA”) for the purpose of developing “an incentive program to stimulate commercial redevelopment of vacant, physically declining, or underperforming commercial properties within the City.” [Doc. 36-2 at 2-3, 9.] In support of that purpose, and along with an agreement between the County and Union County, the IGA created a Joint County Industrial and Business Park (“JCIBP”). [Id. at 2, 4, 7.]
Under the IGA, property owners approved for inclusion in the JCIBP received annual fee-in-lieu-of-ad-valorem-tax rebates (“rebates”) for redeveloping or renovating a property within a rebate incentive program (“the Program”). [Id. at 6.] Property owners submitted their redevelopment costs to the City and the City used them each year to determine the amount of the increase in tax revenues attributable to the redevelopment of the property (“the Increment”). [Id. at 5-6.] Property owners in the Program received a rebate from the City annually in the amount of 30% of the Increment. [Id. at 6-7.] Those payments continued for a total of 15 years or until the sum of the rebates for a particular property reached 20% of the redevelopment basis (the “Cap”), whichever came first. [Id.]
The City's 30(b)(6) representative explained at his deposition that taxes cannot legally be rebated, but fees can be, and thus the money property owners were paying was treated as fees. [Doc. 36-14 at 15.]
The IGA provides that “[e]ligible redevelopment costs include land (per pre-development assessment value), demolition, site preparation (grading and underground utilities), building construction, site improvements (parking, walks, landscaping, lighting), and design fees.” [Doc. 36-2 at 7.] The IGA states that “[c]osts must be documented and certified to the City, which must then certify to the County that the affected property is eligible for Park inclusion.” [Id.]
The IGA also defined how the remaining 70% of the annual Increment for a particular property was distributed and how the fees were collected. For the first 15 years that a property was included in the Program, 40% of the annual Increment was paid to the City to be used for economic development purposes, and the remaining 30% was distributed to all existing taxing entities on a pro rata basis. [Id. at 6-7.] The County was responsible for collecting the fees and forwarding the portion of those fees constituting the Increment to the City, which made rebate payments to owners and other payments to other taxing entities. [Id.]
Hillcrest Shopping Center
After the Program was created, Plaintiff John Floyd sought to have property that he owned in the City, Hillcrest Shopping Center (“Hillcrest”), included in the Program. [See Doc. 36-1.] On August 9, 1999, the City approved Hillcrest for inclusion [Doc. 1-2], and on June 19, 2000, the County passed a resolution adding Hillcrest to the list of included properties [Doc. 1-3]. Based on the redevelopment and renovation costs Floyd submitted for the City's approval, the City determined that the redevelopment basis allowed for the project would be $15,230,507. [Doc. 42-2 at 5.] Thus, under the terms of the IGA, Floyd was entitled to receive annual rebate payments from tax year 2000 through tax year 2014 or until rebates equaled the Cap amount of $3,046,101.00. [Id.]
Plaintiffs allege that at the time Hillcrest was approved for the Program, Floyd and Plaintiff Gordon Farms, Inc. (“Gordon Farms”) each owned separate portions of Hillcrest. [Doc. 1 ¶ 19.] However, Floyd transferred his ownership interest in Hillcrest to Gordon Farms on June 27, 2000, and on that same day, Gordon Farms transferred the entirety of Hillcrest to Hillcrest Shopping Complex, LLC, which is a subsidiary of Gordon Farms. [Docs. 1-6; 1-7; 42-4 at 14-15.] Floyd owned 100% of Gordon Farms. [Doc. 56-1 at 3-4.]
The K-Mart Parcel Agreement
A K-Mart retail store was located on one of the parcels that comprised Hillcrest (the “K-Mart Parcel”). [Docs. 1 ¶ 22; 22 ¶ 23; 42-5 at 12.] However, at some point, that store closed permanently because of K-Mart's corporate bankruptcy proceedings. [Doc. 42-5 at 11.] The store closure was a difficult blow for Hillcrest, Floyd, the City, and the County because K-Mart was an anchor tenant in the shopping center. [Id. at 11-12; Doc. 42-4 at 6.]
The K-Mart Parcel was identified with Tax Map number 7-09-14-096.06. [Doc. 1-14.]
Following K-Mart's bankruptcy, Floyd and the City discussed what could be done to the K-Mart Parcel to replace the store with other tenants. [Doc. 42-5 at 11-14.] ¶ 2004, Floyd proposed to the City that (1) the K-Mart Parcel be removed from Hillcrest's JCIBP designation, (2) that Floyd be granted another individual JCIBP designation specifically for the K-Mart Parcel to assist with his redevelopment costs associated with renovating the KMart Parcel, and (3) that a new 15-year fee rebate period for the K-Mart Parcel be allowed once redevelopment was completed. [Docs. 1 ¶ 24; 22 ¶ 25).] Following discussions with Rodrick Banks and Edwin Memmott, City staff concluded that, upon completion of the redevelopment work and certification of the qualifying redevelopment costs, the City would recommend that the City and County Council designate the K-Mart Parcel as a new redevelopment site under the Program in order to make it eligible for redevelopment credits for 15 years. [Docs. 1 ¶ 24; 22 ¶ 25; 36-4; 42-4 at 26; 42-5 at 16-23.] The City also agreed that it would use the K-Mart Parcel's lower pre-2000 redevelopment value, rather than the value of the parcel at the time they were entering the agreement, to maximize the rebate payments that Floyd would receive. [Doc. 36-14 at 20-21.] In the end, a new redevelopment basis was not calculated, the 20% rebate Cap was not increased, and no City or County Council approval was sought; rather, Memmott simply used his “administrative discretion” to approve the agreement, and the agreement (“the K-Mart Parcel Agreement”) was not reduced to writing. [Docs. 42-4 at 47-49; 42-5 at 21-28, 31.]
Sale of Hillcrest to Excel
During the redevelopment of the K-Mart Parcel, Floyd began negotiating a sale of the entirety of Hillcrest to Excel Realty Partners, LP (“Excel”). [Docs. 36-7 at 3; 42-4 at 8, 19-22.] Floyd initially asked for $36,000,000. [Doc. 42-4 at 21-22.] As the parties negotiated, however, Floyd was informed that, in connection with the sale, the City would require that any new owner bring a portion of Hillcrest known as “Specialty Row” into compliance with the applicable fire codes and other requirements, before the new owner would be able to lease it. [Id. at 23-24.]
Specialty Row is a parcel and tax map number 7-09-14-096.00, separate from the K-Mart Parcel, and it consisted of 120, 000 square feet of retail space. [Docs. 1-11 at 5; 42-4 at 23-24.]
The City's Building Code Inspector, Buddy Bush, testified in his deposition that, in fact, several circumstances would trigger a need to comply with the current building codes, including renovation; a new tenant occupying a space; and possibly a change of ownership if the new owner came to the City for a business license, which could lead to a Certificate of Occupancy inspection. [Docs. 42-4 at 26; 42-7 at 11-14.]
In the end, the parties agreed to a net sales price before prorations and costs of $31,309,522. [Doc. 36-7 at 3.] After prorations and costs, the total due from Excel to Gordon Farms was $14,547,001.75, which Excel paid by giving Plaintiffs interests in other commercial properties that Excel held. [Id.; Doc. 36-13 at 26-27.] Under the terms of the sale, Gordon Farms retained the right to receive the rebate payments. [Docs. 1-10; 1-12; 42-4 at 20.] The sale closed on February 16, 2005. [Doc. 36-7 at 3.]
Disagreement Arises
In 2001, Floyd received his first rebate payment, for tax year 2000. [Doc. 1-8 at 3.] Floyd continued to receive payments in 2002 through 2005 for the 2001 through 2004 tax years. [Id. at 7, 8, 10, 14, 15, 19.] Starting in 2006, for the 2005 tax year, the City made the payments to Gordon Farms. [Doc. 1-11 at 4.] Gordon Farms continued to receive the rebates, through the payment it received in 2017 for the 2016 tax year. [Id. at 7, 12, 15, 20, 24, 28, 32, 36, 40, 44, 48.]
The payments were for the following amounts for the following tax years: 2000, $72,945.00; 2001, $86,245.27; 2002, $66,123.93; 2003, $87,568.37; 2004, $88,835.87; 2005, $95,440.87; 2006, $120,525.54; 2007, $127,684.24; 2008, 140, 059.68; 2009, $156,627.00; 2010, $163,496.59; 2011, $164,501.80; 2012, $166,968.57; 2013, $172,641.18; 2014, $176,890.71; 2015, $176,890.71; 2016, $181,147.16. [Docs. 1-8 at 3, 7, 8, 10, 14, 15, 19; 1-11 at 4, 7, 12, 15, 20, 24, 28, 32, 36, 40, 44, 48.]
On November 15, 2017, Dennis R. Locke, the City's Finance Director, sent Gordon Farms a letter stating that the City had overpaid Gordon Farms in April 2017 in the amount of $181,147.16. [Doc. 36-8.] The letter stated that the City's records showed that Gordon Farms received its fifteenth annual rebate payment in April 2016, and thus no further payment should have been made. [Id.] The City requested that Gordon Farms return the overpayment amount to the City. [Id.] About four weeks later, on or about December 11, 2017, Locke sent a second letter to Gordon Farms. [Doc. 36-9.] In that letter, the City acknowledged that it had extended the rebate period for the K-Mart Parcel and thus the total amount of overpayment was actually only $125,624.12. [Id.] Two days later, Locke sent a third letter to Gordon Farms. [Doc. 36-10.] In that letter, the City asserted that the 15-year rebate period actually ended with the 2015 payment for tax year 2014, not with the 2016 payment for tax year 2015. [Id.] The City indicated that because it was not just one annual rebate payment but actually the last two annual rebate payments that should not have been made, the overpayment to Gordon Farms, after the subtraction of the amount of rebates due on the K-Mart Parcel, was $248,297.02. [Id.] Finally, on February 12, 2018, Memmott sent a letter to Gordon Farms setting out the history of actions between the parties and the rebate payments, and reiterating that Gordon Farms had been overpaid by $248,297.02. [Doc. 36-11.] The letter stated that the City would withhold further rebate payments concerning the K-Mart Parcel as an offset to the overpayment. [Id.]
Since that time, as it indicated it would in the February 2018 letter, the City has stopped making rebate payments to Gordon Farms although the City has continued to receive Increment payments from the County that are attributable to Hillcrest. [Doc. 42-8 at 3-5.]
An Alleged Additional Agreement between Plaintiffs and the City
Upon receiving the letters asserting that he had been overpaid, Floyd objected to the City's position; Floyd maintained, and continues to maintain, that subsequent to entering the K-Mart Parcel Agreement, the parties formed a new agreement to extend the rebate period for the entire shopping center (“the Extended Agreement”). [Doc. 42-4 at 37-44.] According to Plaintiffs, in response to Floyd's expressing his concern to the City about the upgrades needed to Specialty Row and the City's interest in Specialty Row being upgraded, Memmott, on behalf of the City, agreed to begin a new 15-year annual fee rebate period for all parcels of the shopping center-not just the K-Mart Parcel-to begin in the year after the redevelopment work was complete. [Id. at 25-33.] As part of this agreement, the right to rebate payments would transfer from Floyd to Gordon Farms. [Id. at 29-33.] Plaintiffs assert that Excel had previously agreed to buy Hillcrest for $36 million before Floyd became aware of the needed upgrades and that it was only because of his agreement with the City that he lowered the sales price by about $3 million. [Doc. 36-13 at 23-24.] Plaintiffs allege that the redevelopment and renovation was completed by 2007 and thus that a new 15-year rebate period commenced for the entire shopping center in tax year 2007 and continued through tax year 2021. [Doc. 1 ¶¶ 34-35.] There was no written contract memorializing the Extended Agreement. [Doc. 36-13 at 34-35.]
Floyd testified that, in appreciation for the City's willingness to enter into the Extended Agreement, Floyd also agreed to install a fountain at a particular location that the City desired. [Doc. 42-4 at 33-34.]
The parties met several times regarding this issue but were unable to come to an agreement. [Doc. 36-14 at 23-24; 42-4 at 38, 41-44.] Indeed, Memmott testified that he does not recall ever discussing with Floyd the possibility of extending the 15-year period for all of Hillcrest. [Doc. 42-5 at 33.]
The Parties' Claims and Counterclaims
Plaintiffs' Complaint asserts claims against the City for (1) breach of contract-Intergovernmental Agreement (as a third-party beneficiary), (2) breach of contract, (3) breach of contract-implied covenant of good faith and fair dealing, (4) breach of contract accompanied by a fraudulent act, (5) unjust enrichment/quantum meruit, and (6) promissory estoppel. [Doc. 1 ¶¶ 53-90.] The City asserts counterclaims against Plaintiffs for (1) unjust enrichment, and (2) breach of contract-implied covenant of good faith and fair dealing. [Doc. 22 ¶¶ 131-40.] Both parties seek money damages and attorneys' fees. [Docs. 1 at 25; 22 at 29.]
APPLICABLE LAW
Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Procedure states, as to a party who has moved for summary judgment:
The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.Fed. R. Civ. P. 56(a). A fact is “material” if proof of its existence or non-existence would affect disposition of the case under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue of material fact is “genuine” if the evidence offered is such that a reasonable jury might return a verdict for the non-movant. Id. at 257. When determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities against the movant and in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).
The party seeking summary judgment shoulders the initial burden of demonstrating to the court that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has made this threshold demonstration, the non-moving party, to survive the motion for summary judgment, may not rest on the allegations averred in his pleadings. Id. at 324. Rather, the non-moving party must demonstrate specific, material facts exist that give rise to a genuine issue. Id. Under this standard, the existence of a mere scintilla of evidence in support of the non-movant's position is insufficient to withstand the summary judgment motion. Anderson, 477 U.S. at 252. Likewise, conclusory allegations or denials, without more, are insufficient to preclude granting the summary judgment motion. Id. at 248. “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson, 477 U.S. at 248. Further, Rule 56 provides in pertinent part:
A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.Fed. R. Civ. P. 56(c)(1). Accordingly, when Rule 56(c) has shifted the burden of proof to the non-movant, he must produce existence of a factual dispute on every element essential to his action that he bears the burden of adducing at a trial on the merits.
DISCUSSION
Plaintiffs' Claims
The City argues that it is entitled to summary judgment on at least Plaintiffs first five claims-and possibly on all six claims-because the Statute of Frauds prevents the Extended Agreement from being legally enforceable. [Docs. 36 at 16-27; 47 at 5-14; 54.] The City also argues, for separate reasons, that it is entitled to summary judgment on Plaintiffs' claims for quantum meruit/unjust enrichment and for promissory estoppel. [Id. at 25-27; Doc. 56.] The Court will begin by addressing the City's argument that it is entitled to summary judgment on the basis of the Statute of Frauds. Then, the Court will turn to the City's separate contentions that do not concern the application of the Statute of Frauds. For analytical purposes, after discussing the Statute of Frauds, the Court will address the separate arguments concerning promissory estoppel before discussing the arguments concerning quantum meruit/unjust enrichment.
The City does not concede that the Extended Agreement existed, but it argues that even if it did exist, it was not enforceable because of the Statute of Frauds. Accordingly, for purposes of this section, the Court assumes that the Extended Agreement existed.
Whether the Statute of Frauds Applies to the Extended Agreement
The City argues that the Statute of Frauds applies to the Extended Agreement insofar as it was impossible that the Extended Agreement could have been performed within one year. [Docs. 36 at 16-27; 47 at 5-14; 54.] As is relevant here, South Carolina's Statute of Frauds provides that no action shall be brought “[t]o charge any person upon any agreement that is not to be performed within the space of one year from the making thereof . . . [u]nless the agreement upon which such action shall be brought or some memorandum or note therefore shall be in writing and signed by the party to be charged therewith or some person thereunto by him lawfully authorized.” S.C. Code Ann. § 32-3-10(5) (emphasis added).
The City does not argue that the Statute of Frauds applies for any other reason, although it notes in a footnote in its initial memorandum in support of its summary judgment motion that “[s]ubpart (4), ‘[t]o charge any person upon any contract or sale of lands, tenements or hereditaments or any interest in or concerning them....' could arguably be applicable under the circumstances.” [Doc. 36 at 16 n.3.] Accordingly, the Court limits its Statute of Frauds analysis to subpart (5), the one-year provision.
The meaning of the emphasized language is central to this case. South Carolina courts have emphasized that “[t]he Statute of Frauds applies only to contracts which are impossible of performance within one year.” Roberts v. Gaskins, 486 S.E.2d 771, 774 (S.C. Ct. App. 1997) (emphasis added). “A contract having a contingency which may occur within the year need not be supported by a written document.” Id. The critical question when determining whether the Statute of Frauds applies “is not what th[e] probable, or expected, or actual performance of the contract was, but whether the contract, according to the reasonable interpretation of its terms, required that it should not be performed within the year.” Warner v. Tx. & Pac. Ry. Co., 164 U.S. 418, 434 (1896), quoted in Coves Darden, LLC v. Ibañez, No. 2014-000339, 2016 WL 4379419, at *8 (S.C. Ct. App. Aug. 17, 2016) (unpublished opinion) (Konduros, J., concurring in part and dissenting in part). “[U]nless an alleged parol contract shows on its face that it is not capable of being performed within one year, it does not contravene the Statute of Frauds.” Elkins v. Plywoods-Plastics Corp., 65 S.E.2d 243, 245 (S.C. 1951); see McGehee v. S.C. Power Co., 196 S.E. 538, 540 (S.C. 1938) (“[I]t must appear, within the agreement, that it is not to be performed till after the year.”). Accordingly, “[t]he fact that performance within a year is highly improbable or not expected by the parties does not bring a contract within the scope of this clause.” Roberts, 486 S.E.2d at 774.
The Court is also cognizant of the fact that application of the Statute of Frauds is an affirmative defense. Fed.R.Civ.P. 8(c)(1). As such, “[t]he party pleading an affirmative defense has the burden of proving it.” Pike v. S.C. Dep't of Transp., 540 S.E.2d 87, 91 (S.C. 2000) (internal quotation marks omitted).
Here, Plaintiffs argue that a genuine and material factual dispute exists as to whether the Statute of Frauds applies to the Extended Agreement because there is a dispute as to whether, at the time the parties entered into the Extended Agreement, it could possibly have been performed in one year. [Doc. 57.] Plaintiffs contend that, although highly improbable, it was possible that, within one year of the making of the Extended Agreement, the required renovations would be completed and the City would have paid Plaintiffs rebates reaching the Cap amount, thereby fulfilling all of both parties' obligations under the agreement. [Id.] For its part, the City does not dispute that it was possible that Plaintiffs would fulfill their obligations under the Extended Agreement within one year of the formation of the contract. [Doc. 54.] However, the City argues that it has forecasted evidence showing that, at the time the parties entered into the Extended Agreement, it was impossible for the City to pay rebates reaching the Cap amount within one year. [Id.]
In their memorandum opposing the City's summary judgment motion, Plaintiffs did not challenge the City's assertion that it would have been impossible, at the time of the formation of the Extended Agreement, for it to be performed within one year. [Doc. 42.] However, Plaintiffs argued that the Statute of Frauds did not bar legal enforcement of the Extended Agreement because several exceptions to the Statute of Frauds applied. [Id. at 13-22.] After reviewing the parties' memoranda, the Court requested that the parties provide supplemental briefing on the question of “whether the one-year standard has been met here, including . . . whether it would be possible that, within one year of the formation of the new agreement, the City could have made rebate payments the sum of which totaled the Cap amount.” [Doc. 53.]
The dispositive fact here is that, under the Extended Agreement as alleged, once the renovations were completed, the costs submitted, the rebates calculated, and the rebates paid reached the Cap amount, the parties' obligations would be completed. Because no term in the agreement itself precluded these contingencies from occurring within one year, the Statute of Frauds does not apply. See Elkins, 65 S.E.2d at 245; McGehee v. S.C. Power Co., 196 S.E. at 540. The City points to a number of facts outside of the agreement that it contends demonstrate that, practically speaking, these contingencies could not occur within one year. However, from the Statute of Frauds to apply, it must be the terms of the agreement itself that preclude performance within a year. Because no such terms exist here, the Statute of Frauds does not apply.
In support of its assertion that, in practicality, the Extended Agreement could not have been completed within one year, the City points to the time of year that the parties allegedly entered into the Extended Agreement, the times of the year that different relevant government entities take certain actions, and the amount of previous valuations and rebate payments concerning Hillcrest. [Doc. 54 at 3-6.] But, as the Court has noted, when the agreement itself does not preclude performance in one year, the Court has no occasion to consider extra-contractual circumstances that may make performance within a year highly improbable. See C.R. Klewin, Inc. v. Flagship Props., Inc., 600 A.2d 772, 779 (Conn. 1991) (“When a contract contains no express terms about the time for performance, no sound reason of policy commends judicial pursuit of the collateral inquiry into whether, at the time of the making of contract, it was realistically possible that performance of the contract would be completed within a year.”)
The City maintains that its case for application of the Statute of Frauds is supported by Springob v. University of South Carolina, 757 S.E.2d 384 (S.C. 2014). [Doc. 54 at 6-7.] The Court disagrees. In the agreement at issue in that case, the University of South Carolina (“the University”) was required to provide the plaintiffs with premium seats and other amenities in the University's new basketball arena for a “five year term” and the plaintiffs were required to pay $5,000 per seat in the first year and $1,500 per seat in each of the next four years. Id. at 386-87. The Supreme Court of South Carolina held that the Statute of Frauds applied to such an agreement because even if the plaintiffs could fulfill their obligations within one year by paying the entire $11,000 per seat during the first year, the University's obligations to provide the seats and other amenities for five years could not be performed in one year. Id. at 387.
The City maintains that Springob is analogous because, as it was for the University in Springob, it was impossible when the agreement was formed for the City to fully perform in one year. [Doc. 54 at 6-7.] However, the City's argument simply begs the question of whether it would be impossible for the rebates to reach the Cap amount so quickly. What the City fails to appreciate is Springob is an example of exactly the type of case to which the Statute of Frauds applies in that the terms of the contract itself foreclosed the possibility that it could be fully performed in one year because the University was required to fulfill its obligation for five years. Because there are no allegations that the Extended Agreement included analogous obligations setting out a specific minimum time that the City would have to continue to perform, the Statute of Frauds does not apply.
For these reasons, the Court recommends that the City's summary judgment motion be denied as to its Statute of Frauds argument, which is the only basis on which the City argues it is entitled to summary judgment on Plaintiffs' first four claims. The Court will now proceed to address the City's other arguments addressing the promissory estoppel and unjust enrichment claims.
Plaintiffs' Promissory Estoppel Claim
The City argues that it is entitled to summary judgment on Plaintiffs' promissory estoppel claim because Plaintiffs have not forecasted evidence that they suffered an injury as a result of their reasonable reliance on a promise made by the City. [Doc. 56 at 4-6.] The Court agrees.
After reviewing the parties initial memoranda regarding the City's motion for summary judgment, the Court requested supplemental briefing on the issue of whether the failure to forecast evidence of any loss as a result of their reliance on the existence of the oral agreement entitled the City to summary judgment on Plaintiffs' claims for unjust enrichment and promissory estoppel. [Doc. 51.]
“The elements of promissory estoppel are (1) an unambiguous promise by the promisor; (2) reasonable reliance on the promise by the promisee; (3) reliance by the promisee was expected by and foreseeable to the promisor; and (4) injury caused to the promisee by his reasonable reliance.” N. Am. Rescue Prods., Inc. v. Richardson, 769 S.E.2d 237, 241 (S.C. 2015).
In their supplemental memorandum, Plaintiffs identify a number of injuries that they contend could satisfy the fourth element of their claim. The Court addresses them seriatim.
Plaintiffs first claim that they were injured because, in reliance on the existence of the Extended Agreement, Plaintiffs sold Hillcrest for less than the $36 million price they originally had negotiated. [Doc. 55 at 5-7.] The Court concludes that Plaintiffs have not forecasted evidence that could support a reasonable inference that Plaintiffs suffered such an injury. Simply put, although Excel may have tentatively agreed to the $36 million price pending its undertaking of due diligence, once Excel realized what renovations would be required to maximize Hillcrest's profitability, it decided that $36 million was too much to pay. [Doc. 47-1 at 12-16.] And Plaintiffs have not forecasted any evidence that anyone else had a different view. In fact, Floyd testified that he did not have any other offers to buy Hillcrest and that the price it sold for was the price it was worth before the upgrades. [Id. at 20.] In the end, Floyd's testimony about what price he negotiated before Excel knew all the relevant facts is beside the point in this case. The fact is that there is no set of facts under which Plaintiffs could have actually completed a sale of Hillcrest for $36 million and thus no evidence that they suffered any injury by selling at the lower price.
Plaintiffs actually discuss this possible harm in relation to their unjust enrichment claim. [Doc. 55 at 5-7.] Nonetheless, the Court will discuss it as it pertains to promissory estoppel as well.
Plaintiffs argue that the City “has admitted that [Hillcrest] could have been sold for a higher price but for those necessary renovations.” [Doc. 55 at 5 (emphasis added).] However, the City's admissions concerning what Hillcrest might have been worth had the renovations not been needed is of no moment because the renovations were needed and it was the need for those renovations rather than the existence of the Extended Agreement that prevented Gordon Farms from getting its $36 million price.
Plaintiffs next argue that they were injured by selling Hillcrest in reliance on the existence of the Extended Agreement because they lost ownership of the mall and the revenue stream that the shopping center was generating. [Doc. 55 at 8-9.] The obvious answer to this argument, however, is that Plaintiffs gave up these things for a price. Unless what they sold was worth more than the price-and they have forecasted no evidence that it was-Plaintiffs were not injured by the sale.
Plaintiffs also contend that Floyd was injured by the sale of Hillcrest because, as part of the deal, he “gave up his personal right to receive the annual fee rebate payments and transferred those rights to Gordon Farms.” [Id. at 9.] However, as the City argues [Doc. 47 at 12], Floyd does not explain how he was injured by transferring rights to a corporate entity for which he is the sole member.
Plaintiffs finally argue that they “have not received the benefit of the bargain with the City.” [Id.] Although not receiving these payments may have been disappointing to Plaintiffs, it is not an injury they suffered as a result of any reliance on a promise by the City. Indeed, they have not forecasted any evidence that had the City never made the promises at issue, Plaintiffs would be any better off.
For all of these reasons, the Court concludes that Plaintiffs have not forecasted evidence that they relied to their detriment on any promise by the City. The Court thus recommends that the City's summary judgment motion be granted as to Plaintiffs' promissory estoppel claim.
Plaintiff's Unjust Enrichment/Quantum Meruit Claim
Plaintiffs' final cause of action is for unjust enrichment/quantum meruit. [Doc. 1 ¶¶ 79-82.] “A party may be unjustly enriched when it has and retains benefits or money which in justice and equity belong to another.” Dema v. Tenet Physician Servs.-Hilton Head, Inc., 678 S.E.2d 430, 434 (S.C. 2009). “Unjust enrichment is an equitable doctrine which permits the recovery of that amount the defendant has been unjustly enriched at the expense of the plaintiff.” Id. That the defendant's enrichment must come at the expense of the plaintiff to support an unjust enrichment claim means that the plaintiff must show “actual damages resulting from the [defendant's] wrongful retention of benefits.” Gignilliat v. Gignilliat, Savitz & Bettis, L.L.P., 684 S.E.2d 756, 764 (S.C. 2009). The remedy for unjust enrichment is restitution. See Sauner v. Pub. Serv. Auth. of S.C., 581 S.E.2d 161, 167 (S.C. 2003). To recover restitution in the context of unjust enrichment, a plaintiff must show: “(1) that he conferred a non-gratuitous benefit on the defendant; (2) that the defendant realized some value from the benefit; and (3) that it would be inequitable for the defendant to retain the benefit without paying the plaintiff for its value.” Id. “To prevail on a quantum meruit claim, a plaintiff must establish (1) he conferred a benefit upon the defendant; (2) the defendant realized that benefit; and (3) retention of the benefit by the defendant under the circumstances make it inequitable for the defendant to retain it without paying its value.” Williams Carpet Contractors, Inc. v. Skelly, 734 S.E.2d 177, 180 (S.C. Ct. App. 2012). “Thus, the tests for quantum meruit and unjust enrichment are indistinguishable.” Gillins v. Celadon Trucking Servs., Inc., No. 2:16-cv-00795-DCN, 2016 WL 4455018, at *5 (D.S.C. Aug. 24, 2016).
Plaintiffs' claim is based on the allegation that they brought about the redevelopment of Hillcrest, not to gratuitously enrich the City, but rather, to fulfill their obligations under the Extended Agreement. [Doc. 1 ¶¶ 79-82.] Plaintiffs further allege that the City has unjustly retained the benefit it realized from Plaintiffs' actions and has refused to make the additional payments Plaintiffs contend they are due. [Id.]
The City argues that Plaintiffs cannot show that it would be inequitable for the City to retain the benefits it has received without first showing that Plaintiffs actually suffered some loss as a result of their actions. [Doc. 56 at 2-4.] Plaintiffs offer two counterarguments. Plaintiffs' initially argue that regardless of whether Plaintiffs were injured, it would be inequitable for the City to retain the benefits it received as a result of actions Plaintiffs took in reliance on the City's promises. [Doc. 55 at 2-5.] The Court disagrees with Plaintiffs on this first argument. To prove a claim of unjust enrichment, Plaintiffs must show that the City benefitted “at the expense of” Plaintiffs. Dema, 678 S.E.2d at 434. Absent a showing that the City's gain came at Plaintiffs' expense, Plaintiff cannot show that it would be inequitable for the City to retain the benefits it would receive, or that any restitution was required. See Gignilliat, 684 S.E.2d at 764
Plaintiffs' second argument is that, to the extent they need to forecast evidence of injury to survive summary judgment on their unjust enrichment claim, they did so by forecasting evidence that Plaintiffs were injured by selling Hillcrest for less than the $36 million price Plaintiffs had negotiated previously. [Doc. 55 at 5-7.] The Court has already explained, in the context of Plaintiffs' promissory estoppel claim, why Plaintiffs have not forecasted evidence that their inability to sell Hillcrest for $36 million bore any causal relationship to any promise made by the City.
In sum, because Plaintiffs are required to prove an injury and they have failed to forecast any evidence of such an injury, the Court recommends that the City's summary judgment motion be granted as to Plaintiffs' unjust enrichment claim.
The City's Counterclaims
The City's counterclaims, for unjust enrichment and for breach of contract, are both based on the City's allegation that it paid $358,038.00 in rebates that Plaintiffs were not entitled to and that Plaintiffs have refused to return the money. [Doc. 22 ¶¶ 131-40.] Plaintiffs argue, for several reasons, that they are entitled to summary judgment on these counterclaims. [Docs. 37; 45.]
Standing
Plaintiffs first argue that the City lacks standing to assert either of its counterclaims because the City did not suffer any injury from its alleged overpayment of rebates insofar as the City would have been required to distribute the money to other entities even had the City not paid it to Gordon Farms. [Doc. 37 at 7-9.] The Court disagrees.
Article III of the United States Constitution limits the jurisdiction of federal courts to deciding only actual “cases” and “controversies.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 559 (1992). The doctrine of standing sets apart those “cases” and “controversies” that are of the justiciable sort referenced in Article III. Id. at 560. “[T]o satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered an ‘injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000).
Here, as stated, the City alleges that it mistakenly paid certain moneys to Gordon Farms that Gordon Farms was not entitled to and that Gordon Farms has not returned. [Doc. 22 ¶¶ 128-30, 132-34, 138-39.] That is sufficient to allege an Article III injury. See Sierra Club v. Morton, 405 U.S. 727, 733 (1972) (“[P]alpable economic injuries have long been recognized as sufficient to lay the basis for standing.”); see also Air Evac EMS, Inc. v. Cheatham, 910 F.3d 751, 760 (4th Cir. 2018) (concluding that the plaintiff's financial losses satisfied the Article III injury requirement). This injury is clearly fairly traceable to Plaintiffs' alleged refusal to return the money and certainly could be remedied by a favorable decision.
Plaintiffs allege that even if the City did overpay Gordon Farms, the City was not injured by the overpayment because had the City not paid those funds to Plaintiffs, the IGA would have required the City to distribute the funds to various taxing entities in the County. [Doc. 37 at 8.] The City disputes Plaintiffs' interpretation of the IGA, contending that the IGA allows the City to retain the 30% portion of the Increment that would have been sent to a property owner had the owner not already received rebate payments for the maximum 15 tax years or for the maximum amount. [Doc. 41 at 3-4 n.1.] The Court need not decide which party's interpretation of the IGA is correct to determine that the City has alleged an Article III injury. It is enough that the City seeks a remedy for mistakenly paying funds to Gordon Farms that Gordon Farms was not entitled to. Which party's interpretation of the applicable agreements is correct is a merits question that does not affect standing. See Covenant Media of S.C., LLC v. City of N. Charleston, 493 F.3d 421, 429 (4th Cir. 2007) (explaining that the standing analysis must not be confused with a determination of the merits and that “[a] plaintiff's standing to bring a case does not depend upon his ultimate success on the merits underlying his case”).
Having determined that the City has standing to assert these counterclaims, the Court now considers Plaintiffs' other arguments.
The City's Counterclaim for Unjust Enrichment
Plaintiffs first argue that they are entitled to summary judgment on the City's counterclaim for unjust enrichment. [Doc. 37 at 9-13.] Plaintiffs do not dispute that at least a genuine factual issue remains regarding whether the City paid Gordon Farms more rebates than Gordon Farms is entitled to. [Id. at 9-11.] However, Plaintiffs argue that the City has waived the right to assert a legal claim to recover the entire alleged overpayment because the City had informed Gordon Farms it would recover the amounts over time through offsets against rebate payments for the K-mart Parcel until the balance was satisfied. [Id. at 11-12.] The Court disagrees.
Plaintiffs claim, however, that the amount remaining after the City's payment of the tax year 2020 rebates was at most $26,937.38. [Doc. 37 at 11, 12 n.3.]
“Waiver is a voluntary and intentional abandonment or relinquishment of a known right.” Parker v. Parker, 443 S.E.2d 388, 391 (S.C. 1994). It is true that the City informed Plaintiffs that it would be withholding future rebate payments as an offset to the overpayments. [Docs. 36-11 at 2; 37-9 at 3.] Although the City did not at that time state that it would be pursuing its rights in the courts, the City also did not state any intention to relinquish its right to turn to the courts if the circumstances warranted it. Accordingly, once Plaintiffs decided to litigate its issues with the City in the courts, the City was free to do the same.
Indeed, Rule 13(a) requires a party to assert a counterclaim “if the claim (A) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and (B) does not require adding another party over whom the court cannot acquire jurisdiction.”
For all of these reasons, the Court recommends that Plaintiffs' summary judgment be denied as to the City's counterclaim for unjust enrichment.
Breach of Contract
Plaintiffs argue that they are entitled to summary judgment on the City's counterclaim for breach of contract, contending that the City has not so much as identified a contract that Plaintiffs breached by not returning the alleged overpayments. [Doc. 37 at 14.] The City responds that the basis for the claim is Plaintiffs' alleged breach of the terms and conditions of the IGA as well as its implied covenants of good faith and fair dealing. [Doc. 41 at 11.] The City maintains that Plaintiffs are third-party beneficiaries to that agreement. [Id.] On reply, Plaintiffs point out that the City, in its Amended Answer, had denied that Plaintiffs were third-party beneficiaries to the IGA. [Doc. 45 at 7 (citing Doc. 22 ¶ 115).] In any event, Plaintiffs assert that regardless of whether Plaintiffs are third-party beneficiaries of the IGA, they cannot be liable for breaching an agreement to which they are not a party. [Id. at 7-8.] The Court agrees with Plaintiffs on that point.
“Generally, one not in privity of contract with another cannot maintain an action against him in breach of contract . . . . However, if a contract is made for the benefit of a third person, that person may enforce the contract if the contracting parties intended to create a direct, rather than an incidental or consequential, benefit to such third person.” Bob Hammond Constr. Co. v. Banks Constr. Co., 440 S.E.2d 890, 891 (S.C. Ct. App. 1994) (emphasis added). In the City's counterclaim, it is of course the City attempting to enforce an agreement-the IGA-to which Plaintiffs are not parties.
Accordingly, the Court recommends granting Plaintiffs' motion for summary judgment on the City's breach of contract counterclaim.
RECOMMENDATION
Wherefore, based on the foregoing, the Court recommends that the City's motion for summary judgment [Doc. 36] be GRANTED IN PART AND DENIED IN PART. The Court recommends that it be GRANTED as to Plaintiffs' claims for unjust enrichment and promissory estoppel and otherwise DENIED. The Court further recommends that Plaintiffs' motion for summary judgment [Doc. 37] be GRANTED IN PART AND DENIED IN PART. The Court recommends that it be GRANTED as to the City's counterclaim for breach of contract and DENIED as to the City's counterclaim for unjust enrichment.
IT IS SO RECOMMENDED.